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Denham calls out SEC on $500 million lease

POSTED July 8, 2011 9:16 p.m.

The Securities and Exchange Commission has relinquished its leasing authority and employees will face prosecution for backdating documents to justify a $500 million-plus lease, following an investigation led by U.S. Rep. Jeff Denham (R—Atwater).

“It is inconceivable that the SEC bound the taxpayer to more than a half a billion dollars based on ‘back of the envelope’ calculations that were inflated and just simply wrong,” said Denham, who chairs the Economic Development, Public Buildings and Emergency Management Subcommittee. “And, it is even more disturbing that such a lease was signed without any formal internal written approval, no [White House Office of Management and Budget] approval and no congressional approval.  On top of that, the SEC proceeded with a sole source contract, ‘negotiated’ over the course of just days, based on a justification document that was backdated and altered.”

In July 2010, the SEC entered into a 10-year lease for office space, anticipating growth due to passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The lease, obligating the government to more than $500 million, was executed in just a few days’ time.

At the request of Denham, the SEC Inspector General completed a report finding that the SEC had vastly overestimated the amount of space needed.  That report was discussed at a June 16 subcommittee hearing, where the SEC Chief Operating Officer and General Counsel could not answer questions related to the no-bid lease, and backdated documents included in the lease.

On Wednesday, Denham led a follow-up hearing to determine whether the SEC should retain its independent leasing authority and to determine accountability for the waste. SEC Chairman Mary Shapiro took responsibility for the waste on Thursday and relinquished the SEC’s independent leasing authority, but it remains unseen what consequences will occur.

“In the private sector, if an employee bound their company to a contract costing over $500 million it did not need, that company would want to know the facts to determine who all should be held accountable and how to prevent it from happening again,” Denham said.  “Federal agencies should be held to an even higher standard as, ultimately, it’s the American people who pay for their costly mistakes.”

To contact Alex Cantatore, e-mail acantatore@turlockjournal.com or call 634-9141 ext. 2005.

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